US President Trump is pushing to remove Federal Reserve Board member Lisa Cook. Media analysts say a successful removal would give him the opportunity to further expand his influence over the White House and the Federal Reserve by controlling a majority on the seven-member board. Media reports indicate that Trump has made it clear he wants the Fed to slash interest rates. Under Chairman Jerome Powell, the Fed has faced sustained attacks from the White House this year, ranging from monetary policy decisions to cost overruns on a major building renovation project. On Wednesday, Trump called for Cook's resignation after Bill Pulte, director of the Federal Housing Finance Agency (FHFA), accused Cook of lying on loan applications to obtain more favorable terms, a potential mortgage fraud offense. Cook, whose term runs until 2038, later responded that she would not resign under duress. Claudia Sahm, chief economist at New Century Advisors and a former Federal Reserve economist, said, "This is a new tactic by this administration to try to control the Fed, and they are using every tool they can find to achieve this control." Analysts said the harsh attack on Cook highlights the Trump administration's willingness to expand its influence over the White House. Previously, the Federal Reserve had historically been insulated from political pressure regarding interest rate decisions. The White House has previously used similar tactics against political opponents such as California Senator Adam Schiff and New York Attorney General Letitia James. Media outlets said this also cast a shadow over the Federal Reserve's annual meeting, which will be held in Jackson Hole, Wyoming, on Thursday evening. Powell will deliver his final keynote address to the gathering of global central bankers on Friday morning, and he is unlikely to explicitly commit to a rate cut, as Trump desires. A majority of seats on the Fed's board of governors held by Trump's own people does not necessarily guarantee the White House's intentions. Federal Reserve officials have so far this year ignored Trump's calls for lower interest rates, citing the inflationary risks posed by his tariffs. Analysts believe that Cook's departure would open up the possibility for Trump to appoint four new Fed governors, giving him a majority on the seven-member board. Trump appointed two of these current governors during his first term and recently nominated Stephen Miran, chairman of his Council of Economic Advisers, to fill the third seat recently vacated by Adriana Kugler, a Biden appointee. This strategy aligns with Trump's approach to filling other federal government boards with Republican nominees. However, media outlets believe that even if Trump secures a majority on the Board of Governors, it doesn't mean he'll get his way on interest rate decisions. Trump's nominees will still need to win support within the broader Federal Open Market Committee (FOMC), which sets interest rate decisions. Furthermore, there's no guarantee these new Board members will simply implement the president's wishes. Another key question is who Trump will nominate to replace Powell when his term as chairman expires next May. Trump's chance to appoint a fifth governor depends on whether Powell decides to continue his term as a governor, which expires in 2028, said William B. English, a former senior Fed economist and current Yale University professor. "Even if another governor is nominated, there's no guarantee the new chair will have the support within the FOMC to push for easier monetary policy." Interest rate decisions are made by the FOMC, a committee of 12 policymakers in Washington and around the country who vote on them. This means that even if the four Trump nominees support a policy initiative, they would still need the support of at least three other voting members to form a majority. Seven governors hold permanent voting rights, as does the New York Fed president. The remaining four voting seats rotate annually among the presidents of the other 11 regional reserve banks. A majority on the board could give the White House greater influence in other policy areas, including bank regulation, which falls under the board's purview and not the FOMC. The Board of Governors is also responsible for approving or rejecting the reappointment applications of the regional reserve bank presidents, who serve five-year terms. Even "insiders" may not be reliable. Some analysts also question whether Michelle Bowman and Christopher Waller, nominated by Trump during his first term, will be willing to cooperate with the White House's will. Bowman and Waller dissented from the FOMC's decision to keep the benchmark interest rate unchanged in July, arguing that a 25 basis point rate cut was warranted, citing signs of a deteriorating labor market that necessitated a policy response. However, Waller, one of the leading candidates to succeed Powell as Fed Chair, has recently emphasized the importance of central bank independence, warning that if leaders lack investor confidence, inflation expectations and market interest rates could rise. Derek Tang, an economist at LH Meyer/Monetary Policy Analytics, said: "Perhaps Trump's thinking is that he will get four fully committed governors, but we can't be sure that the current governors will actually be committed." "The new governors will likely be that way because that's how they were selected. But the current governors, Bowman and Waller, have made the economic case for their support of accommodative policy." Cook's departure could prompt Powell to remain on the board. Powell has not publicly stated his plans after his term expires in May next year. Federal Reserve chairs traditionally leave the leadership after leaving office, even if they can continue their term as governors.
However, some analysts believe that if Cook leaves early, it may put pressure on Powell, 72, to continue serving as a board member to resist political interference to a certain extent.
Andrew Brenner, head of international fixed income at NatAlliance Securities, wrote in a report on Wednesday,
"That is why we believe Powell will grit his teeth and stay on the Federal Reserve Board until his term expires in January 2028."
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